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Two realtors told us no... they are not your competition because people who are looking to purchase short sales and foreclosures are generally not the same people who need to buy a house ASAP.
But it seems buyer's agents are telling their clients yes. If there is a foreclosure in your neighborhood - even if location is absolutely the only similarity between it and your house, it can be included in comps.
I question the motivation of the agents who told you 'no' to your question about the relevance of foreclosed (REO) and short sale properties. Whether or not REO/short sales are used as comparables is dictated by the market. If your area has a lot of short sale listings, then YES, short sales are relevant in determining value...the same goes for REOs. To totally exclude them because of the type of buyer is ridiculous. The ONLY buyer who truly can do anything "ASAP" are cash buyers. Everyone else is at the mercy of their lender. What experience do the two agents who told you "no" have with short sales and REOs?
The answer to your question isn't just yes or no...there are other factors that have to be taken into account. I do a lot of BPOs (broker price opinion) for various banks. Overall, the market where I live is short sale and REO driven. At the same time, there are markets within counties or zip codes that MAY NOT trend the same as the overall market. These areas may not be short sale or REO driven, even though the overall market is. Sounds confusing, but a good agent will help you understand that.
To determine whether a property is comparable, several factors are taken into account. some of the things I check for are the square footage, proximity to the subject property, exterior appearance, and condition. I also take into account the type of area the property is in. For urban areas, I'm allowed to use comps that are within half a mile of the property I'm valuing. I typically use comps that are within a block or two of the property I'm valuing. For suburban areas, I'm allowed to use comps from up to a mile away. Again, I keep my comps within a few blocks of the property I'm valuing. For rural areas, I can search up to 5miles for comps. I typically use comps that are less than 3 miles from the subject.
I don't care about: granite counters and stainless steel appliances, hardwood floors, or light fixtures because these items are not necessarily important to all buyers and they don't add value like an updated HVAC, new windows, or a new roof would.
I think you should elaborate on your question with these agents and ask them how they came up with their answers. Their responses will tell you who really knows the market and who's BSing.
Quote:
Originally Posted by MelanieP
Two realtors told us no... they are not your competition because people who are looking to purchase short sales and foreclosures are generally not the same people who need to buy a house ASAP.
But it seems buyer's agents are telling their clients yes. If there is a foreclosure in your neighborhood - even if location is absolutely the only similarity between it and your house, it can be included in comps.
Foreclosures and most definitely short sales are your competition.
Sellers are increasingly finding that a short sale came to market and got sold/closed, while their own home gathered dust.
A few weeks ago, there were two very similar homes in a sub division, in my zip code, competing with eachother. One was a short sale, listed about $200,000 less than the other. Along came listing #3.....sellers undercut the short sale and went under contract, almost immediately.
The other two remain for sale.
Not all sellers are willing and/or able to do what this seller did to achieve their goal of getting sold.
I don't care about: granite counters and stainless steel appliances, hardwood floors, or light fixtures because these items are not necessarily important to all buyers and they don't add value like an updated HVAC, new windows, or a new roof would.
It's probably a regional and/or a price point thing.....
True tongue and groove ( not pre-finished) hardwood flooring can easily trump the cost of replacing HVAC or a roof and even windows, depending on how many windows and the quaulity.
It's tough to sell a place in some areas, at certain price points, unless the common areas are hardwood.
To me its liike the sale table in a store that has shirts verus the regualr shirts at ful retail. If you like the house buy it if not keep looking.I do think it addss to the uncertainty to but in a neighbor altogether tho.
I disagree with the agents that told you no. A foreclosure is a quick close so they are most definitely your competition as a seller. I have never seen a buyer not look at a bank property because it was a bank property.
Short sales I agree with those agents that said no. Those are in their own category. Buyers are expecting some sort of discount for waiting for those.
OK, but, even if this home were just a regular sale, it has nothing in common with our house other than location. It's about 600 square feet smaller, has no garage, a gravel driveway and nothing has been updated in decades.
We live on a funny street. The homes are older (40 years plus) and they are ALL different. Some have only 1,300 square feet, while others have 3,000, a swimming pool, and are completely renovated.
Surely agents realize that, yeah, that house down the street may be $60K less, but it will also appraise at $60K less. I mean, isn't that sort of like, duh?
OK, but, even if this home were just a regular sale, it has nothing in common with our house other than location. It's about 600 square feet smaller, has no garage, a gravel driveway and nothing has been updated in decades.
We live on a funny street. The homes are older (40 years plus) and they are ALL different. Some have only 1,300 square feet, while others have 3,000, a swimming pool, and are completely renovated.
Surely agents realize that, yeah, that house down the street may be $60K less, but it will also appraise at $60K less. I mean, isn't that sort of like, duh?
Okay but now you're talking about factors that make a comp a comp. We have many older neighborhoods like that in my area, so we go to similar neighborhoods to get comps.
The distressed property by you doesn't sound like a comp because of it's features, not because it is a distressed property. A distressed property with similar features is a comp in most real estate markets.
I think the original poster was referring to COMPARABLES, not COMPETITION. I don't think you should have to use a forclosed or short-sale transaction to base your selling price.
Foreclosure and Short Sales are competition, they compete for the attention of the buyers in the marketplace. Some subset of the buyers that are out there will be making offers on the REO and SS inventory in the area. Reducing the total number of buyers for the more traditional resale.
REO and SS also set the physiology of the buyers. A buyer will see the offer price and the selling price of properties of the same class. The will expect the same deal that's available on a REO/SS on what ever property they offer on.
As REO and SS properties make up more and more of the market place they become the driving force of the market. Our local government property appraisers have been fighting the same issue, not wanting to include foreclosures in the evaluation of property values. But since the traditional resale had to compete with the foreclosed properties in list price just to get an offer the issue became mute.
The realtity of the real estate market today is that everything on the market is your cometition and everything that has recently sold can become a comp.
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